The Flight Centre Travel Group Ltd (ASX: FLT) share price will be one to watch on Wednesday after the release of a late announcement.
What did Flight Centre announce?
This afternoon the travel agent giant announced that it has launched an offering of $400 million senior unsecured convertible notes due 2027, which are convertible into fully paid ordinary shares.
In addition to this, the company has entered into commitment letters with its existing bank lenders for the refinancing of its existing debt facilities. This is conditional on the completion of the notes offering.
As part of the refinancing, the banks will waive Flight Centre's compliance with its existing operating leverage ratio, fixed charges ratio, and shareholder funds ratio covenants until 31 December 2022. After which, its covenants will be calculated based on the six month period from 1 July 2022 to 31 December 2022.
If the offering completes successfully, it will mean Flight Centre's total liquidity at 30 September 2020 on a pro-forma basis increases to $1.3 billion and its total cash and cash equivalents increase to $2 billion.
Why did Flight Centre make this move?
Flight Centre's Managing Director, Graham Turner, expects the capital management initiatives to substantially enhance its funding position and support it in the event of a prolonged downturn.
Mr Turner commented: "The capital management initiatives we are taking today substantially enhance our funding position with longer tenor, extended covenant relief and greater liquidity. While trading conditions continue to improve, we continue to reduce our cost base and we remain prepared for almost all scenarios including a prolonged downturn."
"We are seeing gradual improvement in revenue trends albeit from a modest level and importantly, we continue to win key customers in our corporate business notwithstanding the difficult conditions," he added.
The managing director also spoke about the recent easing of lockdowns in Victoria and today's COVID-19 vaccine news.
He said: "The recent easing of lock-down restrictions in Australia, our largest market, gives us confidence of further improvement in the near term. While we remain cautious given the environment in the Northern Hemisphere, we welcome the recent news of Pfizer's positive COVID-19 vaccination trial data and look forward to further developments, given their potential to fast-track the recovery in travel activity."
